Deborah Hopkins has operated at the highest levels of corporate America for decades, holding senior roles at GM, Lucent, and Boeing, where she served as CFO. She is now Chief Innovation Officer of Citi and founder and CEO of Citi Ventures, a five-year old firm that has a unique approach to investing and an equally unique role in helping its 200-year-old parent company learn how to innovate in today’s startup-drenched landscape.
Many corporate venture firms maintain an arms-length distance from corporate headquarters, but not Citi Ventures. Not only does it focus its investments on startups that add value to Citi’s core business, but it is also responsible for driving new business practices into the company, through a network of growth boards, innovation labs, and the soft power of deep relationships nurtured over decades.
While Hopkins recently announced she’ll be retiring from Citi in January of next year, her legacy will certainly remain. Leading change is complicated in a company that operates in almost every country in the world, is strictly regulated by hundreds of local and national governments, and remains in the national penalty box for its role in the financial crisis of 2008. But Hopkins is a unique leader: She actively seeks out the opinions of others. She is both self-deprecating and candid. And she has built a team around her who, it turns out, are nearly all women — truly rare in the male-dominated world of venture capital.
Below are both the video interview and a transcript, edited for length and clarity.
When I first visited your offices in Palo Alto, I noticed that something was different — and I couldn’t quite put my finger on it. About halfway through I realized, “There isn’t another man in the room besides me.” Is that by chance or was that by design?
I think it was a little bit of both. I’ve always been a passionate believer in women supporting other women. But a lot of those people have shown up at my door and said, “I’m interested in what you’re doing.”
Recently I was sitting at a table with Beth Comstock from GE and Hannah Jones from Nike, and we’re all looking at each other and saying, “Hmmm. There’s something interesting here. Women leading change.”
You ran an initiative at Citi called Citi Women.
There had been women’s activities going on at Citi before, but back in 2005 we approached management and said, “We really need to think about this differently.” One of the things we worked on was how to create advocates for women. As they say in Hamilton, “in the room where it happens.”
Tell me how Citi Ventures is organized. What is its structure?
We’ve built it up over time. One of the first things we worked on when we came out to the Valley was venture investing. Having brought some of the experience of working with companies like Palo Alto Networks and VMware inside of Citi, the idea of being champion of the entrepreneur was core to that.
We hire professional investors. That has been a very good experience because they’ve been part of the ecosystem for a long time. The whole intent is to bring the outside in, and to accelerate time to market for Citi’s businesses, but in the process of doing that work we are seeing trends. I call it “waves form a thousand miles out to sea.” That’s why we’re here. We’re feeling it before you see it. Our team really does a phenomenal job with that.
The whole intent is to bring the outside in, and to accelerate time to market for Citi’s businesses
Do you have limitations? For example, you can’t invest in something that might be a competitor?
Don’t have that — we’re invested in Betterment, for example. You could argue they’re a competitor. We have limitations that are part of Volcker rules and bank regulations and things like that. We have a charter that we follow by focus area.
But at the end of the day, we see thousands of companies every year. All of that knowledge is part of what we also work on — not just doing the investment, but how do we bring that to our businesses.
Citi Ventures is not just a corporate venture group. It has a role within the larger company. Can you tell us a little bit about that?
I’m glad you recognize that, because we fought hard (for that), and it’s been an interesting path getting there. We started with really saying, “We need to bring the outside in.” That’s why we moved to the Valley. We also want to champion really bold exploration and be the catalyst for new skills and new ways of working.
We started by doing Silicon Valley summits. We’ve now done three summits with our senior leadership — they’re curated events bringing the outside in — and with Valley luminaries who help us establish the importance of new skills and new ways of working to drive a growth agenda.
For example, how do we look at what’s happening in the marketing world — which has changed profoundly? How do you start personalizing things? We do a lot on data. We spend a lot of time on security. And certainly on fintech. Our investing team has become very much sought after in the organization, because they have a different view.
It’s like you’ve got a deep sensing network for the rest of Citi?
Precisely. The next part of bringing the outside in is we’ve created this conglomerate of our innovation labs. We don’t run the labs. But we created the network that connects them.
We created a common language. We agreed to have complete transparency of what each lab is working on. We look to have the ability to create some investment in a project that could have a broader potential than just for that original business. It’s become part of what we call new skills and new ways of working.
You’ve brought the Lean Startup concept into Citi. Tell me how you did that, why you did that?
That’s the third part, which is Discover 10X, bringing Lean Startup into the enterprise across all of Citi. That has obviously been part of the entrepreneurial ecosystem here (in the Valley). Ideas are cheap. We have lots of ideas, but there’s a real set of skills and a new way of working that allows you to experiment — rapid prototyping and validation where the cycles are so much faster, and need to be. Our intent was, how do we bring that know-how into Citi and couple it with 200 years of experience so that we can get new ideas into market at an accelerated pace?
It’s working for you?
Yes, we’re really excited. Heavy lifting — it’s been a lot of hard work. It’s completely worth it.
You mentioned innovation labs at Citi. These are in each of the business units or in geographical regions?
Both, but they are run by our business units — and we thought that was really important, because all the work we do is to serve our business. Having them owned by the business was critically important.
It turned out the labs didn’t know each other. We created a lab network at their request, and have created this fabric where we have a common language, a common way of looking at things. One lab can work on a project for another lab.
Finally, we created something called an acceleration fund that can allow me to put some money down on an idea that has potential for Citi scale.
This is for funding ideas inside Citi, not venture investing in external ideas, right?
Exactly. It’s run by the business units. We’ve created a set of strategic areas that we focus on together — things like blockchain or authentication. Citi Ventures doesn’t own it. It’s not positional power. It’s more “How do we create a network within our company to think about things differently?”
Let me pull back. You have a 200-year-old company, which sits in a massive industry that is changing radically.
Exactly.
When you came into the new role in 2010 of running Ventures, what problem were you looking to solve?
Growth. It really was a recognition that we had done all different ways of coming at innovation: doing the innovation at the beginning, being the inventors which didn’t go so well [laughs], and thinking about working alongside our business to bring design thinking in. The realization was: none of that scales.
At the end of the day, innovation is really the enabler to growth in a world where all the equations that we’ve embraced historically are being upended.
When I hear an executive in financial services say “growth and innovation,” I think of crazy derivative products that no one really understands. What do you mean by innovation?
How do we take 200 years of phenomenal know-how, being in every country in the world, government, large industry…We move $7 trillion around the world some days. In all of our consumer businesses, how do we recast that knowledge in a way that’s highly relevant in the world where our customers live today?
Large companies tend to be quite conservative and they tend to have product life cycles that are very long, and they tend to get fixed on ways of doing things. Did you notice this when you came into Citi?
Absolutely. I ran operations and technology at Citi at one point. It was very clear that you’re running a mammoth institution. There’s some natural understanding of not wanting to introduce new things per se, because you have this responsibility of keeping a very redundant system functioning at its highest level and speeds. You also recognize the importance of introducing advanced technologies. We worked hard to bring those two things together.
Do you have an example of a success or a failure in the last five years?
One of the things that formed a core belief of Venture Investing is being the champion of the entrepreneur. Early on I was challenged by Joe Tucci (former CEO of EMC) to meet Diane Green at VMware. I was just blown away. If virtualization works, I thought, this is a cost killer inside of companies. We (Citi) ended up taking VMware public. We were also the first bank to standardize on VMware.
What is the philosophy behind your venture investing? There are venture groups at large companies who are basically looking to make a return, irrespective of the connection to the mothership. You have a different philosophy.
We do. We deeply believe that our remit is to accelerate time to market for our (internal) businesses — to bring the best ideas that we can find to management teams, and business models that we’re seeing out here that we think can be transformative. That’s a very different angle than thinking about a return.
You’ll look at a company or an investment and say, “How can Citi bring leverage to that company?”
Trite phrase, but it is truly a win-win. When we first came out here I went to Andreessen Horowitz, and Ben Horowitz said, “This is interesting, but are you really here?” I said, “Yes. I moved lock, stock, and barrel here.” “Can you move?” “I can.” “Do you have a checkbook?” “Yes.” “Here’s an interesting company to look at,” and that was Silver Tail. It was in cyber (security).
We did a proof of concept, and it was wildly successful. They were just taken aback that they ended up with a very large contract. All the other banks followed suit. Ironically, (in comes) a phone call from Joe Tucci: “I want to buy that company.”
That’s always one of the hard things about being a small company. Let’s just say they are not very good with regulatory framework. Getting through the process of a master services agreement with a giant like Citi is a huge lift for a small company.
Brutal.
If you invest in a company, you’re going to help that company figure out how to work with Citi?
Absolutely.
That’s almost a requirement of your investment, isn’t it?
It’s not a requirement of our investment, but it’s a belief. The majority of our investments have been introduced into Citi, but it’s not a requirement.
Let’s talk about the shift that very large companies are going through right now. We’re seeing new business models that are very rapidly changing entire sectors. Was Citi ahead of this shift, or did you feel like you were just on time with it?
I think we were fortunate to be here, and having gotten here when we did, because we were embedded in the ecosystem. We were able to start bringing that into the organization. The first year we did the Silicon Valley summit, we presented “Pac-Man” — this idea of little startups nibbling around our businesses, whose little choppers get bigger and bigger. Increasingly we are also now partnering with many of these companies. We showed the extent to which these bold, young startups were aimed directly and squarely at some of the businesses that we run.
Do you feel like the senior-most ranks of the executive suite at Citi understood that at the time — like, “Oh my God, we’ve got to do something”? Or was it more “Yeah, we’ve heard this story over and over again.”
They now completely embrace it, but it was a journey. When you’ve been highly successful, embracing a certain way of doing business, it’s hard to argue with yourself — “Why should I spend time thinking about things differently?”
What really helped us was, like so many companies, when you can bring them out, get them out of the office, bring incredible entrepreneurs to the table. It’s a mindset shift.
What do you make of the Valley culture, which seems to celebrate the idea that there’s these breakaway growth, venture-fueled companies run by young people who are going to eat the incumbent’s lunch? When you hear that over and over again…
Pac-Man.
…you believe that’s true.
What I see increasingly, more and more every day, is a lot more partnering.
I think there’s an element of that going on. What I see increasingly, more and more every day, is a lot more partnering starting to go on. One of the most radical people in the whole fintech world has been Mike Cagney from SoFi. I loved him from the day I met him, because he was so passionate about what he was doing.
Obviously, he came from Wells Fargo, he has a deep understanding of the business. Yet, he had this “we’re going to eat your lunch” attitude. He’s now working very closely with the banks. A lot more partnership is going to transpire.
These companies are small but very nimble, but they’re not particularly good at working with governments around the world, for example, or understanding how to run a company that has hundreds of thousands of employees. Is part of what you bring to investing your understanding of how to run a larger company?
You just named our secret sauce. That’s exactly what we do. It’s so hard. When you’re a small company, (it’s) 22 people trying to figure it out. They have a phenomenal idea, but they don’t have the time to troll around junior levels in an organization or to think about and really understand scale.
Even a company like VMware, how can you scale? We did something similar with Palo Alto Networks. How does it scale? If you can find the partnership level, that collaboration place where, “Wow, this is worth our time as a small company,” and guess what? We’re, by osmosis, learning tremendous amounts from how they approach development.
If you look back at your career, you’ve been in many senior roles in many different industries and large companies. What are some of the traits of very large companies that might get in their own way?
I think there’s a great phrase: ”Addicted to being right.” It’s that inherent thing of having been very successful and really believing that you created that business.
The challenge now is to bring to those incredibly successful leaders the understanding that we’ve been abandoned here. The equations that we’ve all depended on have been dissolved. The real thing, the underscore, is (that) predictability has disappeared.
What do you think is underneath this shift that’s happening? People always say technology, but that seems so hand-wavy.
I agree. I think there’s a combination. Clearly, some of the technological advances have been huge — social, mobile, obviously. But to me, the game changer was UX.
When you think about what Apple did, it created this expectation that I’m going to have an awesome experience every time I open my phone, and having that suddenly changed the way every single person in the planet lives, works, and plays.
Actually, when I first met Mike Cagney, I pressed him on what he was doing that’s really unique. Why can’t the people you’re competing with, the big banks, just look and go, “OK, that’s a good idea. We’re going to do this”? He said, “Well, they’ve been doing online banking and Internet for some time, but they don’t understand customer experience.”
He started with Stanford — he had a very strong group that has a very loyal affinity (to Stanford). He identified that Stanford people don’t default on loans. He used that to change his view of risk in loans…
But asking a company that is as large as Citi to change its view of risk is a pretty big ask. Is that actually happening?
Actually, it happens all the time. It’s inherent in a way that business works. That’s why I think these partnerships are so powerful. Banking is risk. We have extraordinary expertise in risk, but to continually be hungry for new ideas, bringing some of these crazy new business models to bear, is really exciting.
Our conversation with Hopkins continues in Part II, which can be found here.